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East Orange Board of Education v. New Jersey Schools Construction Corp.

February 3, 2009


On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-808-06.



Argued December 17, 2008

Before Judges Rodríguez, Waugh and Newman.

The opinion of the court was delivered by WAUGH, J.S.C. (temporarily assigned).

Plaintiff East Orange Board of Education (Board) seeks an order to compel defendants New Jersey Schools Construction Corporation (SCC) and New Jersey Economic Development Authority (EDA) to proceed with certain school construction and renovation projects that have been delayed because of an overall shortage of funds available for such projects statewide. The litigation was initiated in September 2005 as an action in lieu of prerogative writs, R. 4:69, filed in the Law Division, Essex County. In March 2006, defendants successfully moved for transfer of the action to Mercer County. In June 2006, they successfully moved for transfer to the Appellate Division. The Board appealed that order. We denied the defendants' motion for summary disposition by order dated September 16, 2008. We now affirm the order transferring the matter to this court and dismiss the complaint, on its merits, with prejudice.


Before turning to the specific facts of this case, it will be helpful to explore its underlying historical and legislative background.

A. The Educational Facilities Construction and Financing Act

The Educational Facilities Construction and Financing Act (EFCFA), N.J.S.A. 18A:7G-1 to -48, was enacted in 2000 to address problems with public school facilities statewide, but particularly in certain districts requiring enhanced financial assistance from the State, commonly referred to as Abbott districts. N.J.S.A. 18A:7G-2. See Abbott v. Burke, 153 N.J. 480, 523-525 (1998) (Abbott V). The EFCFA established a comprehensive mechanism for the planning, financing, and construction of certain school projects. Initially, the EDA was the only public agency responsible for the implementation of EFCFA.

The EFCFA provides for the funding of capital projects through the issuance of bonds by the EDA. N.J.S.A. 18A:7G-14. The debt service for the bonds is paid out of the General State Fund, subject to appropriation, pursuant to contracts between the EDA and the State Treasurer. N.J.S.A. 18A:7G-17; Lonegan v. State, 174 N.J. 435, 459 (2002).*fn1 For an SDA district,*fn2 which would include an Abbott district such as East Orange, the State share of eligible costs is one hundred percent. N.J.S.A. 18A:7G-5(k). See Abbott v. Burke, 164 N.J. 84, 90 (2000) (Abbott VII).

The SCC was established as a subsidiary of the EDA pursuant to Executive Order No. 24, 34 N.J.R. 2888(a), which was signed by Governor James E. McGreevy on July 29, 2002. The SCC assumed responsibility for the planning and construction aspects of the EFCFA, while the EDA itself remained involved with the financial aspects.

In 2005, the SCC determined that it would have insufficient capital funds remaining to complete all of the school facilities projects in the Abbott districts. Of the $6 billion that had originally been made available for Abbott district school construction projects through the issuance of bonds by the EDA, only $1.4 billion remained unspent by mid-July 2005. See Abbott v. Burke, 185 N.J. 612, 613-14 (2005) (Abbott XIV).

That insufficiency led to "a prioritization of projects to be completed with the remaining funds." N.J.S.A. 52:18A-235(e). A special committee consisting of representatives of the SCC, the Office of the Governor, the Attorney General, and the Department of Education developed a list of fifty-nine Abbott district projects to be given priority for completion by the SCC. The list was approved at the SCC's July 27, 2005, meeting. In 2007, it became apparent that there were not sufficient capital funds remaining to complete even the fifty-nine priority projects. At its April 25, 2007, meeting, the SCC adopted a capital deferral plan, which deferred construction of twenty-seven of the fifty-nine projects.

Following a report from the State Inspector General with regard to its operations, the SCC was abolished in 2007 and replaced by a statutorily created entity, the New Jersey Schools Development Authority (SDA). N.J.S.A. 52:18A-237 (creating the SDA); N.J.S.A. 52:18A-247 (abolishing the SCC and transferring duties and powers to the SDA). The EDA retained its role with respect to the funding of the projects. N.J.S.A. 18A:7G-5(a). To avoid confusion, we will refer generally to the SCC and SDA as the "development authority," unless the context requires a more specific reference.

The reasons for the creation of the SDA were set forth in N.J.S.A. 52:18A-235:

The Legislature finds and declares that:

a. The Constitution of the State of New Jersey requires the Legislature to provide for the maintenance and support of a thorough and efficient system of free public schools and this legislative responsibility includes ensuring that students are educated in physical facilities that are safe, healthy, and conducive to learning.

b. Inadequacies in the quality, utility, and safety of educational facilities among school districts of this State, and particularly in Abbott districts, led to the enactment of the "Educational Facilities Construction and Financing Act," [N.J.S.A. 18A:7G-1 to -48]. That law authorized the New Jersey Economic Development Authority to undertake a comprehensive school construction and financing program, including the funding, ...

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